Cutting emissions raises costs and lowers security

By dint of deliberate policy action the politicians have conspired to create an energy pricing and supply crisis in our energy-rich nation and now have come up with a novel solution. They call it demand management. Rather than offer what we have come to expect in the First World — being supplied with power when we need it at an affordable price — the government is encouraging us to limit our consumption.

It is so keen to cut demand that it will spend taxpayers’ money on pilot schemes through the private and public power companies of Victoria, South Australia and NSW to offer financial incentives for households to curb their electricity use. People will be paid not to use power — to switch it off — at times of peak demand such as on hot summer days when most airconditioners run. Smart devices might turn coolers down or off to win rebates on power bills in the same way some energy-intensive factories receive payments to shut down during peak periods.

This is what we have become: one of the largest exporters of energy (through coal, liquefied natural gas and uranium) is so hellbent on boosting and subsidising renewable energy to cut carbon emissions that we now have grave concerns about the rising cost of power and possible shortages, and will pay people not to use electricity. It may be time for the Yes, Prime Minister scriptwriters to come out of retirement. Or perhaps Samuel Taylor Coleridge could be reworked into the Rime of the Ancient Coalminer with power, power, everywhere but not a switch to flick.

Malcolm Turnbull and Energy Minister Josh Frydenberg have been mulling over energy policy for most of the year, particularly since Chief Scientist Alan Finkel handed down his report in June. Yet still we wait for official word on whether the government will adopt Dr Finkel’s key recommendation of a clean energy target — something former prime minister Tony Abbott has railed against and the government has been crab-walking away from. “There has been too much sloganising, too much politics, too much ideology and, frankly, too much idiocy, and we’re not going to make the same mistakes that were made in the past,” Mr Turnbull said yesterday. Yet the major errors, such as the carbon tax and renewable energy target, have been government interventions and the only proposed solutions are more interventions. As a nation, through actions of federal and state governments, we have inflicted economic self-harm, eliminating our natural economic advantage of cheap and plentiful energy.

Two of the nation’s leading non-political economic reformers, Fred Hilmer and Gary Banks, told our economics correspondent Adam Creighton yesterday that it might be time to wind back the nation’s emissions reductions target under the Paris Agreement, or at least make it subservient to the priorities of cost and reliability. “Not only are we choosing to transition to low emissions at a high cost, which is the RET or RET Mark II, we’re doing it over a compressed timeframe,” Professor Banks said.

The Prime Minister, on the other hand, remains committed to the target (which was agreed under Mr Abbott) and insists we can have our cake and eat it. “You’ve got to make sure that you keep the lights on, people can afford to keep them on, and you meet your emissions reduction obligations,” he said. However, it seems clear that this trifecta — aimed at solving the energy “trilemma”, as Mr Turnbull refers to it — cannot be achieved. Meeting the emissions targets is undermining the cost and security objectives.

Still, we wait, as Mr Turnbull keeps “working through this very complex area very carefully” to finalise a policy. His leadership nemesis Mr Abbott is stepping into the policy vacuum and Labor leader Bill Shorten is promising to go even further and faster down the perilous emissions reductions path.

In South Australia the Labor government is spending $550 million trying to remediate its renewables-dependent network and the Liberal opposition has additional costly plans to do the same. This is our glimpse into an energy future where no one will need to be paid to power down their appliances because it will be too expensive to switch them on, or the electricity will be out anyway.